Six Changes for Nonprofits as Results of the Affordable Care Act

This month, the landscape of this country’s conception of the social safety net rights of Americans changed. Regardless of its flaws, having been imposed as a result of political compromise and political acrimony, the Affordable Care Act has introduced, however weakly, the concept that Americans should have a right to health insurance coverage. As of the end of the official ACA sign-up period, this nation won’t—and shouldn’t—move backward and retreat from the advances it has made in the past four years toward expanding health insurance coverage for Americans. However, that doesn’t obviate the gaps in the ACA’s coverage, the millions of people still left on the sidelines, and the serious questions about what might be expected from the private insurers that are the bulwarks of the program regarding costs and coverage.

Critical in moving forward with a strengthened, more robust system of health insurance coverage is the role of the nonprofit sector. Nonprofit clinics will be crucial in responding to the needs of the remaining uninsured and the many insured who nonetheless cannot afford their premiums and co-pays. Like nonprofit clinics, nonprofit hospitals are going to play new and different roles in the delivery of healthcare services. But beyond the nonprofit healthcare providers, all nonprofits are going to be impacted by changes coming from the Affordable Care Act. In some cases, the changes have been highly positive and show great potential for the future; in others, the results have been disappointing and suggest much more work needs to be done.

We propose six major changes and challenges for all nonprofits in the wake of the first major step toward relatively full implementation of the Affordable Care Act as of the end of the official enrollment period.

1. The healthcare environment has changed—forever

“Armageddon has not arrived,” President Obama exulted. “The Affordable Care Act is here to stay.” Like the gnashing of teeth that greeted Social Security in the 1930s and Medicare and Medicaid in the 1960s, diehard opponents of the Affordable Care Act did everything they could to undermine and undo the enactment of a law dealing with the failure of the private—and public—insurance to cover tens of millions of Americans. Unlike having had to face off against President Roosevelt and Labor Secretary Frances Perkins over Social Security and President Johnson, Congressman Wilbur Mills, and Social Security Commissioner Robert Ball regarding Medicare, opponents of the ACA had to deal with Barack Obama, not quite a Capitol Hill power player like Roosevelt or Johnson, and HHS Secretary Kathleen Sebelius, in charge of a very difficult (to put it mildly) rollout of the program. Even with that, the ACA survived, despite apocalyptic charges and desperate ploys from opponents such as Senator Ted Cruz (R-TX) who tried to single-handedly shut the federal government through a 21-hour Senate tirade against the ACA.

Cruz and others may consider the ACA a victory for creeping socialism, just like members of the Senate in the 1930s who tried mightily—and failed—to get Secretary Perkins to say that Social Security was even a tiny bit socialist. Social Security not only survived, but now even conservative Republicans speak up to defend it as well as Medicare. (Medicaid doesn’t get the same kind of conservative support because it focuses exclusively on low-income people.) Now that the ACA is an indelible part of the landscape of assistance to Americans, nonprofits no longer have to advocate for national healthcare reform, but to ensure that it is modified so that drafting errors and programmatic cul-de-sacs are fixed and people who should be covered get the coverage they need and deserve. They have to make sure that the program is implemented as effectively as possible. They have to monitor the performance of healthcare service providers to connect the idea of expanded health insurance coverage to the reality of expanded healthcare access and improved healthcare outcomes. The entire nonprofit sector has to stand up to today’s politicians who want to turn back the clock and explain that this nation cannot go back on its commitment to improve healthcare for all Americans. The ACA in all likelihood deserves improvement and changes, but in progressive, not regressive directions.

2. Nonprofits’ advocacy agenda must change

Even before Obama’s election, grassroots organizing on healthcare reform was evolving into a national campaign, much of it under the aegis of a coalition called Health Care for America Now (HCAN), with coalition membership including major unions such as AFSCME and the Service Employees International Union (SEIU) and political advocacy organizations such as MoveOn, the Center for Community Change, and USAction. The campaign received substantial amounts of funding, primarily from Atlantic Philanthropies ($27 million), other foundations ($6 million), individual donations ($6 million), and contributions from organizational partners (approximately $9 million).

The tasks going forward for nonprofit advocates are going to change as the ACA, despite the implementation problems encountered to date, shifts from a new program just getting underway to an ongoing element of the nation’s social safety net infrastructure. Our guesses about some of the advocacy agenda changes for nonprofits would be the following:

• In the run-up to the enactment of the ACA, the national campaign was a bit weak in its outreach to and mobilization of people of color, as the evaluation of HCAN paid for by Atlantic found. As it turned out, people of color were often slow to sign up for health insurance. While African Americans, Latinos, and Asian Americans constituted almost half of all pre-ACA uninsured persons, indications are that the sign-up process may not have reduced the racial/ethnic health insurance coverage disparity to the desired or necessary degree. Advocacy for persons of color who have been left out of ACA coverage is going to be desperately needed going forward, including those individuals and families deprived of Medicaid coverage because Southern and Southwestern states refused to expand Medicaid eligibility and those denied coverage because of their status as undocumented immigrants.
• Given the propensity of state governments and the U.S. Congress to float efforts to undermine and undo the ACA, nonprofit advocates cannot rest on the laurels of the ACA’s enactment and the nation’s having passed the March 31st sign-up deadline. According to the National Association of State Legislatures, between 2010 and the end of 2013, 22 states passed laws that either opposed the implementation of elements of the Affordable Care Act or provided for opt-outs. As of the end of 2013, there were 81 bills in the 2013 sessions filed or carried over with the intent of undoing elements of the ACA, and for the 2014 session, there are at least 152 bills and resolutions pending in 32 state legislatures, with two already signed into law. Among the obstructionist laws that have been passed are laws that restrict any additional compliance with the ACA without specific legislative approval (Missouri, Montana, New Hampshire, Utah, and Wyoming), prohibitions against the states’ implementing or enforcing individual or employer mandates, the creation of “interstate compacts” meant to establish health programs operating outside of ACA or other federal laws (Georgia, Indiana, Missouri, Oklahoma, South Carolina, Utah, and Texas), one law that tried to allow for state “nullification” of the validity of the ACA (North Dakota, though its final bill lacked some of the original nullification language, and 22 other states have considered—albeit not passed—nullification bills), and around more than a dozen states, as many as 15 to 17, with laws restricting the activities of federally designated navigators. These laws could make a hash out of the ACA unless healthcare advocacy defeats these pernicious bills.
• Despite massive federal subsidies for states that expand the eligibility standards of Medicaid as allowed for under the ACA, as of March 28th, only 26 or 27 states have done so and three more are considering it. That means at least 21 states have chosen not to expand coverage for people at 100 to 133 percent of the federal poverty level. Across the board, the Medicaid do-nothing states are led by Republican governors—motivated, they largely say, by concerns about the fiscal costs to the states after federal subsidies decrease in future years. If healthcare coverage is deemed in this new environment to be an essential element of the public’s safety net like Social Security and Medicare, the fiscal justifications for Medicaid opposition seem paltry, petty, and punitive. Over time, some of these recalcitrant governors will gravitate to the awareness of their GOP counterparts in Nevada (Brian Sandoval), Arizona (Jan Brewer), Ohio (John Kasich), and New Mexico (Susana Martinez), who showed political courage in standing up against elements of their own parties to support Medicaid expansion. Be assured, it won’t happen without nonprofit advocacy.

3. Questions remain about nonprofits as employers tapping ACA subsidies

A possible victory for the nonprofit sector occurred when nonprofit advocates, led significantly by the National Council of Nonprofits, reminded the White House that its proposed small employer health insurance credit—a tax credit against business earnings—didn’t work for nonprofits, which typically generate little or no profit-like surplus. The White House modified the incentive so that nonprofits could benefit, though at a lower level than for-profit business employers. Nonetheless, it appears that small nonprofit employers—and for-profits as well—were scarce participants in this incentive program, despite the fact that it was an incentive meant to be operational just about immediately after the ACA’s enactment.

According to a GAO report in 2012, despite an eligible pool of small employers (both nonprofit and for-profit) of between 1.4 and four million establishments, only 170,300 small employers actually filed for the credit in 2010; only 28,100 applied for the full credit. The eligibility requirements would seem to have fit nonprofits: employing 25 or less full-time equivalent employees, paying average wages of less than $50,000 for FTE employees, and offering health insurance for which the employers paid at least 50 percent of the employees’ premiums (a requirement that the IRS relaxed in fiscal year 2010). Some of the problems may have been broadly applicable to nonprofit and for-profit employers, e.g., lack of knowledge and concern about paperwork. But some issues seemed more specific to nonprofits. For example, of the 3.5 percent of applicants that made errors on their Form 8941 applications for the credits, half of them were tax-exempt entities. Another factor may have been the impact of state average premium caps, which significantly lowered the base against which the subsidy for nonprofits, offering often more generous plans to their employees than for-profits did, would be applied.

A 2014 report from Sean Lowry and Jane Gravelle at the Congressional Research Service doesn’t add any additional data beyond some IRS data that appears to conflict with the GAO numbers, but indications appear to be that nonprofits have not been active users of the credit. The Treasury Inspector General for Tax Administration (TIGTA) found that in fiscal 2012 that 19,472 tax exempt employers claimed $73 million of small business tax credits, expected to be higher than the estimate for 2013:

Figure 1: Tax-Exempt Organization Small Business 
Health Care Tax Credit Claims by Processing Year

There appears to have been a disconnect for tax-exempt employers. More than 19,000 tax-exempt employers claiming the credit may look good, except when compared to the number of potentially eligible tax-exempt employers. The Agency for Healthcare Research and Quality’s Medical Expenditure Panel Survey put the number of nonprofit employers in 2012 at 535,397 of which 341,897 (63.9 percent) had less than 25 FTE employees. That means that some 5.9 percent—or less—of potentially eligible tax-exempt small businesses are getting the subsidy to which they ought to be entitled. For small employers—and for small tax-exempt employers—the highly touted small business subsidy doesn’t appear to be working.

4. A new field of nonprofit service: health navigators

The Affordable Care Act created a new function, that of the ACA navigators who were funded to help people get insurance coverage on the state and federal exchanges by providing information about consumers’ options and assisting them in the enrollment process. Given the complexity of the processes and options in the Affordable Care Act and the fact that a majority of the people in need or likely to go to the exchanges for assistance might be people of color, it is difficult to underestimate the importance of the navigators to whatever good the ACA might accomplish. Working tirelessly against the challenges of dysfunctional exchange websites and obstacles placed by state legislators, the navigators have been heroes and heroines in helping people get the coverage they might be entitled to through national health insurance reform.

It wasn’t a lot of money to create this function. The Department of Health and Human Services awarded only $67 million to 105 organizations to carry out the ACA navigator functions. Each exchange was required to have at least two organizations designated as navigators, of which at least one was required to be a nonprofit. While it is not clear exactly how many people were recruited and hired to work as navigators among the list of navigator grant recipients, it isn’t a large number. For example, Maryland got 300 people certified as navigators; South Carolina ended up with around 100 certified navigators; Arkansas had plans to field 535 navigators; using federal and state resources, California had plans to put 16,000 navigators and helpers into the field by the end of the year, though apparently only 5,000 were likely to be certified by the end of December. Assume with the addition of non-federal resources to federal dollars, perhaps as many as 100,000 people have been functioning as navigators, earning, by the way, relatively low salaries, generally much less than $40 an hour. It may not be a huge number of people, but it is a beginning of a core function of the nonprofit sector: helping underinsured and uninsured people access health insurance and obtain healthcare assistance, both under the ACA and under whatever programs might be developed for those left behind by the ACA’s exigencies.

5. Valiant CO-OPs don’t take the place of the public option

When President Obama and his Democratic allies gave up on the “public option,” the alternative “Hail Mary” option was the creation of healthcare cooperatives that would compete with private insurers, an idea largely suggested by Senator Kent Conrad (D-ND) based on his experience with rural cooperatives. It wasn’t a robust idea for replacing a public option. As NPQ wrote, the history of healthcare cooperatives in the U.S. hadn’t been particularly positive over the years, and new start-up cooperatives were unlikely to be able to provide much competition with the private insurers. Congress then further hobbled the cooperatives by converting the ACA’s cooperative start-up grants to loans, preventing the cooperatives from using the federal funds for marketing, limiting them from selling insurance to large employers, prohibiting them from banding together to negotiate joint contracts with doctors, and cutting off prospects for future funding after the fiscal cliff deal. The Obama/Conrad CO-OP proposal was actively undermined even by Democrats, including by Nebraska’s Democratic senator, Ben Nelson, who worked with the private insurers opposing grants to the CO-OPs as “gifts” and “federal handouts.”

It should be no surprise, then, that these nonprofit cooperative insurers haven’t had across-the-board positive results to show at the close of the initial ACA enrollment period, attracting what Associated Press called “minuscule shares” of the market. In Washington State, where there has been a history of health insurance coops, only 5 percent of enrollees on the state’s exchange chose co-op insurers; in Oregon, only 3.3 percent of enrollees signed up with the state’s two cooperative insurers; in Conrad’s North Dakota, only 516 people signed on with a cooperative insurer. According to the AP report, the reasons include the fact that several of the 23 cooperatives are small startups unlikely to be able to compete with established for-profit insurers, had plans that weren’t always well priced to compete, suffered their own healthcare.gov-like computer problems, and failed “to develop brand recognition, due in part to restrictions on advertising and lobbying that were a condition of the co-ops accepting the federal funding.” The Wall Street Journal piled on with an editorial denunciation of the ACA this week suggested that the cooperatives were fundamentally flawed and destined for failure, noting the dissolution of the Vermont cooperative and suggesting that its counterparts in Maryland, Michigan, and Illinois were “barely afloat.”

However, in a couple of states nonprofit cooperatives have proved to be competitive. For example, 80 percent of enrollees in Maine signed up with Maine Community Health Options. In New Mexico, startup nonprofit cooperative New Mexico Health Connections enrolled more than 9,000 people out of 18,600 New Mexicans who purchased coverage on that state’s exchange. Even more impressive, the nonprofit Kentucky Health Cooperative sold 77 percent of the 77,000 private health insurance plans purchased on the Kentucky exchange. Trailing far behind KHC was Anthem Blue Cross Blue Shield, which sold only 12 percent of the policies on the exchange.

AP and the Journal could have mentioned indications of greater success of nonprofit health insurance cooperatives in Wisconsin, Kentucky, New Mexico, and Maine, but that’s really not the point. Whatever the nonprofit cooperative insurers might have been able to accomplish, the actions of Congress were clearly designed to leave them all but incapacitated. The nonprofit sector writ large seemed to have little to say about the creation of the nonprofit cooperatives and did little that we know of to stand up for them when Congress did its utmost to leave the financially and functionally impaired. Whether or not there is a future for nonprofit health insurance cooperatives, the enmity of Congress and the passivity of nonprofit leadership groups combined to create a next-to-impossible reality for these start-up insurers. They were probably not going to generate any results commensurate with what a public option would have done, but the way the nonprofit cooperatives turned out was predictable and, in public policy terms, disappointing.

6. The future beyond the Affordable Care Act

Many observers attribute some aspects of the troubled implementation of the Affordable Care Act to President Obama’s having “caved” to private insurers as opposed to pursuing a single-payer system. The Rube Goldberg structure of the ACA may have been the inevitable result of a program that depends mostly on private insurers, due to Congress’s rejection of even a potential public option alternative (other than Medicaid) because of right-wing opposition.

The notion that the ACA is a stalking horse for a single-payer system still animates some of the opposition. Former Republican Congressman Tom Tancredo, long known for his opposition to immigration, both legal and otherwise, greeted the end of the ACA sign-up period with the warning that the “scary” ACA was “designed to fail to bring about a single payer and bring about a socialized healthcare system.” A Forbes medical columnist ominously warned that the ACA, in potential presidential candidate Hillary Clinton’s yet-to-occur campaign, would be “fixed” by her plans for a single-payer system, despite the fact that her own program during her husband’s presidential administration was no less dependent on private insurers than Obama’s, and her “single-payer fix” may simply be one of reviving the public option—note the term “option”—to private insurers rather than a replacement for them.

While there’s little evidence that we can see that national Democrats are willing to take on the insurers and Big Pharma, there are some states that might give Tancredo more than Obama and Clinton to worry about as they begin to explore single-payer systems. Democratic governors or legislatures in Vermont, Maine, and Hawaii have much more courage than their national party counterparts and are actively discussing universal healthcare in their states, noting that a single-payer system (think of Medicare for all) would reduce “monopoly profits” and “administrative bloat” by streamlining the process of obtaining healthcare coverage (compared to the process of working through the federal and state exchanges) and reducing unnecessary paperwork.

Think of healthcare as a civil right. Remember how, even with health insurance coverage, many people eschew going to doctors or filling prescriptions because they cannot afford the costs of co-pays; many even find their premiums, pre- and post-ACA, to be burdensome. Remember how American healthcare, whether the ACA or none, is predicated on a system of health coverage based on profits flowing to major insurers for whom profit takes precedence over health. For some people, like Dr. Margaret Flowers, healthcare is or should be a civil rights issue. She is actually refusing to purchase health insurance herself as a statement of civil disobedience to what she considers to be a broken health insurance scheme. Private health insurance is a fundamentally flawed product being foisted on the American public, she says.

In fact, she opposes the terminology surrounding the ACA:

“The mass media and politicians are constantly talking about the healthcare marketplace,” Flowers has written. “We are being indoctrinated with market rhetoric. Patients are called consumers and health insurance plans are called products. The problem with this is that healthcare doesn’t belong in the marketplace whose logic dictates that care should be denied if a profit cannot be made. Healthcare is a public good and something that everyone needs throughout their lifetime.”

Perhaps people forget that there is a very successful single-payer system already operating in the nation for 44 million people 65 years old or old—Medicare. Flowers wants Medicare for everyone. Somehow, the opponents of single-payer systems are able to mentally sidestep the fact that the most successful health coverage system currently in existence in the nation (other than the system that exists for the super-wealthy, who can buy whatever they want) is a government-provided single-payer system.

The ACA as a precursor for a single-payer system isn’t what President Obama had planned, either by omission or commission, in the messy design and implementation of the Affordable Care Act, and it was never a part of the health insurance reform system from Hillary Clinton that never made it to legislative enactment at all. Forbes and Tancredo might not have much of anything to fear from Clinton and Obama, but they might—or should—from civil rights activists like Flowers and nonprofits that know what is really happening to people who are likely to be inadequately served or left out entirely by the ACA’s private insurers.